“Unlocking Hidden Regulatory Strength in the United Kingdom”

Conventional wisdom would have you believe that the United Kingdom outside the European Union economic bloc is a minnow relative to comparable markets such as China and the United States. However, when it comes to cryptocurrency markets, the rules are far from set, and the UK has several overlooked and misunderstood advantages relative to other markets.

A Global Financial Hub

London’s leading position as a global financial hub means that UK regulation has a significant global influence. It is now non-negotiable for any country outside of Europe to observe UK financial promotion rules if the communication can affect the UK. In fact, a breach of these rules can result in up to two years imprisonment and an unlimited fine.

Regulatory Superpowers

The Financial Conduct Authority (FCA) has recently published guidance that firms providing on/off-ramp services to crypto firms conducting illegitimate activities could themselves be committing an offense or facilitating an offense. Firms breaching the FCA rules risk losing their banking and payment rails.

Marketing materials that purport to promote investment activity in a token must be created to comply with or fall out of the regulatory scope of the UK Financial Promotions regime. This guidance highlights the growing interest from the FCA in taking action to ensure that the UK’s rules are complied with.

Growing Regulatory Clarity

As regulatory clarity grows, it makes sense for cryptocurrency companies to take a risk-based approach when entering a new market and engaging with ethical third parties to scale their ventures. Companies looking to expand into the EU face several challenges and opportunities under the Markets in Crypto-Assets (MiCA) regulation.

Challenges and Opportunities

While MiCA purports to be a single regime, experience shows that different EU countries will seek to position themselves as the ‘go-to jurisdiction.’ In practice, there are only likely to be a couple of winners. We are already seeing some divergence between EU member states in this respect.

Divergence among EU Member States

There is a difference in terms of the level of taxes imposed on crypto firms and the ease with which firms can interact with existing infrastructure to sell products. Some countries offer pre-existing licenses, while others require a substantial amount of local substance. Advisers in each jurisdiction will seek to sell themselves, but companies can choose the best jurisdiction based on their specific needs.

Cost of Compliance

The cost of compliance with MiCA can be minimized, and companies are looking to headquarter their corporate group in the UK due to its deep network of legal and financial services. The UK’s regulatory position is often used as a benchmark for other jurisdictions.

Collaboration among Regulators

Regulators globally are interested in seeing what the UK regulatory position is, and there has been collaboration among regulators to set common minimum global standards. Companies that take a UK-first approach to their products benefit from an established and robust legal framework internationally recognized by other jurisdictions.

Conclusion

Businesses and investors would do well to consider these all-too-often overlooked regulatory advantages that being based in the UK offers when planning for the future. The UK’s position as a global financial hub, its robust regulatory framework, and its influence on other jurisdictions make it an attractive location for cryptocurrency companies.

By understanding the nuances of MiCA regulation and taking a risk-based approach to entering new markets, companies can minimize costs and maximize opportunities. Don’t overlook the advantages that being based in the UK offers – consider them when planning for the future.

About the Author

Pavan Kaur is a partner at Gunnercooke, serving as a fractional chief marketing officer to crypto companies. Pavan is also a GTM strategy expert for Outlier Ventures’ accelerator programs.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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